Learn common end-of-term lease fees in Canada—renewal/evergreen, return damage, inspection, FMV buyouts—and how to avoid surprises.
End-of-term fees are where “cheap monthly payments” can quietly turn into an expensive lease. The good news: most of these fees are predictable and avoidable if you know what to look for—before you sign and 90–120 days before your term ends.
In this guide, you’ll learn:
If you want the broader lease-terms foundation first, start here: https://www.mehmigroup.com/blogs/early-payout-buyout-end-of-term-terms-what-you-must-check
Most end-of-term fees fall into three buckets: process costs (inspection, paperwork, shipping), asset condition risk (damage, missing parts), and contract enforcement (auto-renewal, late notice, disposition/remarketing). Your job is to decide which bucket you’re willing to live with—and remove the rest with better structure and better timing.
Under the hood, leases are built around end-of-term options like purchasing the equipment, renewing the lease, or returning it.
Every lease ends one of three ways. Knowing which one you intend to choose is step one, because fees are usually tied to the ending you didn’t plan for.
You pay a fixed purchase option (like 10%) or an FMV (fair market value) purchase amount—plus potential admin/title/discharge costs. Purchase options can be fixed or based on future fair market value.
You pay the costs to return the equipment in contract-ready condition—often inspection, freight, missing components, excess wear, and sometimes disposition/remarketing fees (more on that below).
You extend for a period with renewal payments—or you get “rolled” into an evergreen/auto-renewal if you miss notice deadlines (this is where many surprises happen). An evergreen lease is one that self-renews unless notice is given within a specified period.
For an underwriting lens on how lenders price and control risk on equipment deals, see: https://www.mehmigroup.com/blogs/credit-review-explained-how-equipment-deals-are-underwritten
Here are the fees we see most often in equipment leasing files:
A lessor may contract remarketing to another party “in exchange for a remarketing fee.”
The most avoidable end-of-term fee is the one caused by doing nothing.
An evergreen lease renews automatically unless you give notice in the required window. If you miss that window, you may be committed to extra months (or another year), often at a rate you didn’t price-shop.
If you’re comparing who is stricter on these terms, this shortlist helps: https://www.mehmigroup.com/blogs/top-equipment-leasing-companies-in-canada
Returns get expensive when the lease expects you to return the asset in a defined condition, with all included components, and you treat the return like “dropping off a rental car.”
Most equipment leases treat alterations and modifications as subject to restoration at the conclusion of the lease. That can include removing add-ons, returning guards, reinstalling OEM parts, or providing original attachments.
Practical move: 90 days before end-of-term, take photos/video and do a pre-inspection with your mechanic. Fix cheap problems early, because end-of-term repair quotes are rarely cheap.
If you need flexibility for seasonal businesses so you’re not forced into the wrong end-of-term decision, see: https://www.mehmigroup.com/blogs/flexible-term-equipment-financing-canada
FMV (fair market value) structures can be excellent—if you truly want flexibility. But they’re also where end-of-term confusion is most common.
Fair market value is defined as an arm’s-length value between a willing buyer and willing seller. If your purchase option is FMV, you may not know the exact buyout number until the end.
There is also a concept of an FMV cap—a high-end limit that protects a lessee from upside risk on an FMV lease. Not every contract includes it, but it’s one of the smartest “sleep-at-night” clauses to request when FMV is on the table.
Contrarian but practical take: if you’re 80–90% sure you’ll own the equipment, an FMV end is often the wrong structure. A slightly higher monthly payment with a fixed buyout can be cheaper in stress and surprises.
If you’re unsure whether you should buy, refinance, or restructure at end-of-term, this is the next best read: https://www.mehmigroup.com/blogs/what-is-equipment-financing-canada-guide-for-2026
If you return the equipment, the lessor has to re-home it. That’s time, cost, and risk—so many contracts allow a remarketing/disposition fee.
Remarketing is the process of selling or leasing the equipment to another party upon termination, sometimes via a third party “in exchange for a remarketing fee.”
Security deposits can reduce risk and sometimes improve approvals—but they can also create confusion at end-of-term if you assume they automatically come back.
A refundable security deposit is paid as security for fulfillment of obligations and is typically refunded once all obligations have been satisfied.
Underwriting is not just “can you make the payment?” It’s “can we control losses if something changes?”
A classic credit lens is the 5Cs—character, capacity, capital, collateral, conditions. End-of-term fees and clauses show up mainly in collateral (asset condition/resale) and conditions (market volatility, equipment obsolescence).
Under the hood, lenders also think in risk components:
End-of-term clauses help shape LGD by controlling return condition, remarketing, and the lessor’s ability to monetize the asset.
This also ties into lender “guardrails”:
If you want a practical bank vs non-bank “why do they care?” explanation, see: https://www.mehmigroup.com/blogs/bank-declined-your-equipment-loan-heres-your-best-next-move
Here’s a quick, underwriter-friendly way to read your lease before signing (or before maturity).
Find the clause that says what happens at term end: purchase, renew, or return.
Search for “notice,” “renewal,” “evergreen,” “extension,” “termination.” Evergreen leases self-renew unless notice is given in time.
Look for “inspection,” “pickup,” “freight,” “storage,” “disposition,” “remarketing,” “documentation,” “admin.”
FMV is an arm’s-length market value. If you see FMV, also look for an FMV cap.
Alterations may be subject to restoration at the conclusion of the lease.
Lease math is not just contract math—it’s tax timing and cashflow.
CRA explains that you can deduct lease payments incurred in the year for property used in your business (with rules depending on the situation). (Canada)
For GST/HST registrants, CRA’s RC4022 guide explains the basics of charging/collecting GST/HST and claiming input tax credits (ITCs) where eligible. (Canada) CRA also outlines methods to calculate ITCs, including the regular method. (Canada)
Practical takeaway: even if you can claim ITCs, you still need the cash to pay the GST/HST on invoices when due.
Passenger vehicle gotcha: If your “equipment” is actually a passenger vehicle, deduction limits can apply. The Department of Finance announced that deductible leasing costs remain at $1,100 per month (before tax) for new leases entered into on or after January 1, 2026. (Canada)
When you buy out equipment or refinance it, you often need security interests discharged. In Ontario, you can register a security interest or search for a lien through Access Now / PPSR. (Ontario)
Budget mindset: discharge/search/admin costs are rarely the biggest expense—but delays can be. If you need to refinance quickly at end-of-term, paperwork speed matters.
If you’re considering a refinance or cash-out instead of returning the asset, see: https://www.mehmigroup.com/blogs/equipment-refinance-canada-cash-out-sale-leaseback
The “end-of-term fee problem” is often a structure problem. If you choose the wrong end-of-term option (FMV when you’ll almost certainly buy, or return obligations you can’t operationalize), you’re setting up future friction.
This is why Mehmi often focuses on:
If you’re comparing options outside the bank box, start here: https://www.mehmigroup.com/blogs/alternative-to-bank-equipment-financing
And if you’re choosing providers, this overview helps: https://www.mehmigroup.com/blogs/best-equipment-financing-companies-in-canada
Business: Ontario-based contractor (7+ years operating)
Asset: skid steer + attachments
Intent: return and upgrade at end of term
What went wrong: They assumed the lease would “end automatically.” They missed the notice window and landed in an evergreen renewal—continuing payments while trying to source a replacement unit. Evergreen leases self-renew unless termination notice is given within the required period.
Second hit: When they eventually returned the unit, the lessor flagged missing attachments and condition issues. They also faced a disposition/remarketing fee tied to the return process. Remarketing/disposition fees can apply when the lessor must sell or lease the equipment after termination.
How we’d structure it differently (the “no surprises” playbook):
Result: On the next cycle, the business avoided evergreen renewals and returned equipment with fewer disputes—because the process was planned, not improvised.
If you have a lease coming due in the next 6–9 months, you can usually eliminate most end-of-term surprises with one simple move: request the end-of-term options letter now and compare buy/return/renew using real numbers (including fees, logistics, and downtime).
If you want Mehmi to sanity-check your end-of-term clauses and flag the “surprise fee” language, share a redacted term sheet and we’ll point out what matters before you’re stuck with it.
An evergreen lease self-renews unless you provide termination notice within the required period.
They’re common in return scenarios because the lessor must sell or re-lease the unit, sometimes via third parties charging remarketing fees.
Do a pre-inspection 60–90 days out, fix inexpensive issues early, and inventory all included accessories (attachments, remotes, keys). If alterations were made, plan restoration.
FMV is determined near end-of-term based on market value, so the buyout can be higher than expected. A contract may include an FMV cap to protect against upside risk, but not all do.
CRA explains that lease payments incurred in the year for property used in your business can be deductible, depending on the situation. (Canada)
Yes—lease invoices often include GST/HST, and buyouts can also have tax implications. CRA’s RC4022 guide explains GST/HST basics and ITCs (where eligible). (Canada)
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